Qantas posts $244m loss, cancels $8.5b order for new jets

Qantas boss Alan Joyce has cited an “uncertain global context” as the reason for the airlines’ decision to surprisingly cancel a $8.5 billion new investment in 35 new airliners.

While announcing a larger than expected loss for the carrier in Sydney this morning, Joyce blamed “record” high fuel bills and transformation costs as factors influencing the airline’s statutory loss after tax of $244 million.

It is the first time since Qantas went private in 1995 that the airline posted a net loss.

Despite the announcement, the company’s share price was was two cents higher at $1.19 when the ASX opened.

After posting the result, CEO Alan Joyce said Qantas would be canceling its order for a new fleet of 35 Boeing 787 aircraft. The aircraft are worth AU$8.5 billion at list prices, Joyce said.

“The B787 is an excellent aircraft and remains an important part of our future. However, circumstances have changed significantly since our order several years ago,” Joyce said in a statement.

“`It is vital that we allocate capital carefully across all parts of the group.”

Qantas blamed the annual loss on its $A4.3 billion fuel bill – up 18 percent from last year – an industrial dispute that the airline said cost $A194 million, and its struggling international business, which lost $A450 million.

“Our biggest challenge is Qantas International, but its transformation is on track,” Joyce told reporters.

“Our goal is to return it to profit and ensure it remains Australia’s iconic flagship carrier.”

Joyce declined to offer profit guidance for next year, saying it would be “imprudent” given the uncertain global conditions.

‘Bad management’ to blame, say pilots

But pilots slammed Qantas management over the airline’s historic net loss, saying waste and bad management is to blame.

The Australian and International Pilots Association (AIPA) conceded the airline had faced a tough set of circumstances over the last year.

“However there is no denying that this airline could be doing much, much better if it had enjoyed good management over recent years,” said AIPA president Captain Barry Jackson.

He cited a number of failings such as not investing in modern, fuel-efficient aircraft and “poorly thought-out” ventures in southeast Asia.

The impact of management’s “unnecessarily militant approach” to industrial relations, which resulted in the grounding of the entire Qantas fleet last year, continued to do damage to the Qantas brand, Jackson added.

“Staff engagement is at all-time low, along with profits,” he said.

Jackson also pointed to Red Q – the new premium airline to run out of Singapore or Malaysia – and the New Spirit multimillion-dollar marketing campaign.

“A year on and these have been discarded and proven to be giant wastes,” he said in a statement.

The loss for the 12 months to June 30, 2012, compares with a net profit of $250 million in the previous year.

The result was at the upper end the airline’s expectations of between $50 million and $100 million.

Morningstar analysts has expected a statutory loss of $198 million after restructuring costs of between $370 million and $380 million.

‘An exceptional period’, says Joyce

“Clearly we have been through an exceptional period,” Joyce said.

“With lower capital requirements and substantial liquidity, we are now turning our attention toward debt reduction to strengthen the balance sheet.”

Joyce said Qantas’s international operations, which were being restructured, lost about $450 million and was the only part of the airline group not to be profitable in 2011-12.

Qantas did not offer guidance, saying the operating environment and economic outlook for the first half of 2012-13 “remains challenging, volatile and dependent on a number of uncontrollable external factors”.

Qantas shocked the market with a massive earnings downgrade in June, slashing its underlying profit before tax estimates to between $50 million and $100 million for the year to June 30, 2012.

Goldman Sachs analyst Andrew Gibson said in a June note to clients that this years’ earnings should benefit from the end of industrial action last year,the cutting of loss-making routes and other restructuring initiatives.

However risks remain from increased competition in the domestic market, which has been Qantas’s best-performing division.

“With this volatility in global conditions, fuel and foreign exchange rates, as well as the ongoing internal transformation we have underway, it would be imprudent to offer profit guidance at this time,” Joyce said.

http://www.heraldsun.com.au/business/qantas-posts-245m-loss/story-fn7j19iv-1226456359030

 

Category: FinanceAsia